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MINNEAPOLIS — Target Corp. capped a spectacular fiscal 2021 performance by recording more than $100 billion in sales for the first time and achieving record earnings per share in the fourth quarter. With both its in-store and e-commerce channels operating impressively, management has announced an aggressive program of investments to drive long-term growth and expand pay and health care benefits for Target’s employees.
Reported net earnings for the 12 months ended January 29 soared 59% to $6.95 billion, or $14.10 per diluted share. Excluding a gain of 55 cents per share on the sale of Dermstore and a penny for other items, adjusted earnings rose 44% to $13.56 from $9.42 in fiscal 2020.
Full-year sales climbed 13.2% to $104.61 billion, driven by a 12.7% surge in comparable sales that was comprised of a 12.3% hike in the number of transactions and a 0.4% uptick in the average transaction (following a 15% jump last year). Target’s brick-and-mortar stores continued to be the primary engine of its success, with 81.1% of sales originating in the stores while 18.9% originated digitally (up from 17.9% last year).
Management points out that total sales have grown by more than $27 billion since 2019, breaking down into $14 billion of additional store sales and $13 billion in digital revenue. All five of Target’s core merchandise categories generated double-digit comparable sales growth in fiscal 2021.
“It’s been five years since I stood in front of many of you, the head of then a $70 billion company,” chairman and chief executive officer Brian Cornell told analysts with obvious pride. “Today, I stand in front of you as the head of a $106 billion growth company with a long list of proof points that our strategy is working.
“We’ve delivered 19 consecutive quarters of comp growth — 11 quarters before the pandemic, eight quarters since the pandemic. We’ve grown because we’ve accelerated our investments in our team and in our strategy. We’ve accelerated our growth because our team stepped up in heroic ways, meeting the explosive demands that materialized with the pandemic.”
To fuel ongoing long-term growth, the company has unveiled a plan to invest up to $5 billion in its physical stores, the digital experience, fulfillment capabilities and supply chain capacity. For starters, the retailer plans to open about 30 stores, which will raise its fiscal year-end store count of 1,926 to approximately 1,956.
The new locations will range in scale from mid-size stores in dense suburban sites to small-format boxes in urban centers such as New York’s Times Square and Charleston, S.C. In addition, the company will carry out 200 full-scale renovations of existing stores, which will bring more than half of the store base to fully remodeled status since 2017. Furthermore, hundreds of other smaller upgrade projects will be executed across the chain to enhance store fulfillment functions and expand in-store brand partnerships.
For example, last year 100 Ulta Beauty at Target shops opened in Target stores, and this year more than 250 additional openings are slated, with plans to operate at least 800 of the shop-within-a-store sections over time. During Target’s financial community meeting earlier this month, Christina Hennington, executive vice president and chief growth officer, pointed out that the Ulta sections average more than twice the sales productivity of the rest of the store.
“Specifically, in stores that have added an Ulta Beauty section, we’re seeing a mid-teens lift across total beauty and productivity lifts in complementary categories as well,” she said.
This year will also see Target continue to enhance its fulfillment and replenishment capabilities by investing in sortation centers, which organize digital orders that are packed by local stores for quick neighborhood delivery. The centers give Target next-day shipping capability in dense markets and allow it to further scale its strategy of using stores as fulfillment hubs. The sortation model, which was successfully tested in Minneapolis, will be deployed by this spring in Dallas, Houston, Austin, Atlanta and Philadelphia, with five more facilities set to open later in the year.
In addition to these formidable initiatives, Target will invest up to $300 million more in its team members during fiscal 2022. The retailer is setting a new wage range of $15 to $24 per hour for hourly team members working in stores, supply chain facilities and headquarters offices. Additionally, beginning in April, about 20% of Target team members who work a minimum average of 25 hours a week will be newly eligible to enroll in a Target medical plan. The previous threshold was 30 hours a week.
“We are a bigger, stronger company now,” Cornell concluded. “We’re growing on a bigger base than ever, and we recognize the power of ‘and.’ We have a slate of focused initiatives, and they work together in unison.
“… Above all, we built a culture that cares. Our teams understand the way to grow and win together is to care. They care about each other. They care about our guests. They care about our communities … As I look at the future of Target, I increasingly see care separating us from the industry.”
